Without a dashboard process improvement becomes impossible. Listen to this podcast to learn what a dashboard is, how you use it and how a great dashboard will lead to process improvement in your business.

In today's episode, Josh talks with Courtney DeRonde, Today’s guest, a CPA and Managing Partner of TDT CPAs and Advisors, a boutique advisory and accounting firm for small businesses and nonprofit organizations. They help overwhelmed, successful leaders understand and maximize financial information so they can achieve better results and move their organization to the next level.

As an owner in her firm and managing partner, she also has firsthand experience running and scaling a small business.


Narrator:        Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.

In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh Patrick:   Hey, how are you today? This is Josh Patrick. And you're at Cracking the Cash Flow Code.

And my guest today is Courtney DeRonde. Courtney is the managing partner at TDT CPAs and advisors. And it's rare that I have CPAs on the show because they always want to talk about what happened yesterday. But, today, we're going to do something different. We're going to talk about how you can use your numbers to predict what's going to happen in your business and why you need a dashboard to help you do that.

So, instead of me telling you about all the wonderful things I believe about dashboards, we'll have Courtney come on and she can tell us what she thinks.

Hey, Courtney. How are you today?

Courtney:       I'm doing well. Thanks for having me, Josh.

Josh:                My pleasure. So, Courtney, let's start off with most CPAs I ever run across love to talk about profit and loss statements, and balance sheets, occasionally cash flow statements, but rarely do they talk about stuff that's going to predict what happens in your business. Is there a reason you think that might be true?

Courtney:       Well, I think, foundationally, a lot of accounting is about capturing what happened and reporting on it in the form of profit and loss, balance sheets, tax returns. And so, that has been the primary focus of accounting, historically. And it's certainly important to capture what's happened and report on it, but we believe there is much more power in using that information to also look proactively into the future and to influence your future results because, when you look at historical financials, you can learn some things and glean some things from what has happened. But how much better is it to look at things as they're happening and make changes while you can still influence the future results? So, that's our focus - using that information to be more proactive, using numbers to be more proactive.

Josh:                So, what numbers would be more proactive or how do you go about doing that?

Courtney:       Yeah. So, we work with clients to understand the main drivers of their business and the activities going on. So, the financial statements capture the balances and the results of the activities. But there are people performing processes in each business every day. And some of those activities drive the financial results of the business more so than others. So, we work with clients to understand which of those activities that are happening every day in their business have the biggest impact on their results. Maybe it's the ones that are causing the most problems right now but looking into the underlying activities and then measuring and monitoring those results.

Can I give you an example of one?

Josh:                Yeah. I was just about to ask you for an example.

Courtney:       Yeah. So, an example would be a lot of businesses struggle with cash flow problems. And that is just a symptom. It could be any number of underlying problems that are going on in the business. So, one example that could be why you're having cashflow problems is maybe your customers are too slow to pay you, or maybe your team isn't getting your invoices out the door quickly enough, maybe they're not paying fast enough because your invoices are full of mistakes and errors. And so, they're disputing charges. And so, you have to have team members, you know, working back and forth with your customers and trying to sort out those details.

So, a lot of times, businesses will measure and monitor the number of days in accounts receivable aging. And that just tells you how many days old your accounts receivable is right now. It doesn't tell you why that's happening. So, to dig down to those underlying activities. So, one of those activities could be, like I mentioned, that your team isn't getting the invoices out quickly enough. So, maybe you need to set a goal around the number of days from the service delivery or the product delivery to the invoice going out and start measuring and monitoring that and set a goal to tighten that gap. Or, maybe it's because the invoices are inaccurate, and you need to set a goal around having, you know, fewer errors in those invoices. If those are the causes of your cash flow problem, you start measuring and monitoring those. Then, the timeliness of customer payments will speed up and you'll get cash collected more quickly and your cash flow will improve. So, it's all about those underlying activities.

Josh:                But, at the end of the day, it might be none of those and you just have bad paying clients. In which case--

Courtney:       It could be.

Josh:                --I would say it's more likely with today's computerized systems that it's rare you see an invoice with a mistake in it, assuming people can do key punch correctly.

Courtney:       Yeah. It depends. So, we have we have clients in like mental health services and their clinicians are providing services to their patients. And they have to choose very specific codes and information in order to get it paid by third‑party payers. And so, in the healthcare world, having claims rejected because of wrong codes can be a really big problem.

So, we had a client that we worked through this process with where the problem was, you know, tight cash flow. Once we dug into it and really mapped out the process, from service delivery to payment and all the steps in between, with their different teams, we found out that there were some things that billers were doing that clinicians didn't realize and vice‑versa. And so, it can be. But every business is different. So, it's really all about digging into those underlying activities or going upstream, some people will say. You know, looking to what's happening before this actual result or symptom appears and measuring and monitoring those activities.

Josh:                Yeah. But I would say with blue‑collar businesses, as your example, it'll be more likely you just have slow playing clients. In which case, I would say, you go to them and say, “Look. You either pay me in 30 days or I cut you off, or I give you 2% 15 net 16.” Those are the sort of solutions that most of our listeners wouldn't want to go to because they're blue‑collar businesses, you know. So, let's talk about blue‑collar businesses and not healthcare providers, please.

Courtney:       Sure.

Josh:                So, at any rate, that's one good example of, you know, looking at improving cash flow. What kind of measurements would you look to have - and I call these dashboards, would not be in the P&L, balance sheet, or cash flow statement?

Courtney:       Yeah. So, some of the activity around your revenue, your underlying activities, that don't show up in the profit and loss would be like your volume of leads coming in, your conversion rate on wins, the number of proposals you've put out, the average price per service that you deliver. Some of those activities. So, maybe you have a revenue goal that's going to show up in your budget and the ending result in your profit and loss.

But you have to dig into the underlying activities. How many bids do you need to put out there? What does your win rate need to be on those bids? What is the average price on those bids in order to achieve your revenue goal? So, working with those types of activities.

But, again, they don't show up in QuickBooks. They show up in some of your sales activity, or your CRM, or the spreadsheet that you're using to track it. Measuring and monitoring those items and then tweaking-- you know, maybe you've got plenty of leads but you're not winning enough of them. So, figuring out what's happening? What's the gap there?

Or maybe you're winning plenty of them but they're too small. You're not going after-- or getting enough opportunities with clients that are large enough for you to reach your revenue goal. Maybe it's too small a revenue and a high volume, you don't have enough team members to actually get that done. So, those are examples of things that don't show up in the financials that are those underlying activities that happen every day.

Josh:                So, if I'm a construction business and I put out 30 proposals, 30 bids, whatever you want to call it, how many of those should I close?

Courtney:       Well, you know, typically, we look for, oh, between 50% and 70%. I'd say, if you're below 50%, there's a problem. If you're too high, you might be leaving money on the table by bidding too low. And so, you really have to know your differentiator. If you're differentiating on price and you're able to somehow get a margin different than the rest of your competitors, you know, more power to you. But, a lot of times, unless there's a really good strategy in place to be the low‑cost provider, you don't want your win rate to be too high because it probably means you're leaving money on the table.

Josh:                Yeah. I don't ever see a construction company with a 50% win rate. What do you guys do that make ‘em get to that level? I mean, that's a big win rate.

Courtney:       Well, I think part of it is being really strategic in what you bid and not wasting time bidding on projects that you have a very low likelihood of getting. Or, if the competition is so great in a particular type of project, narrowing in on something that's more specialized, where there aren't going to be as many competitors. So, it really depends on your business.

But the more that you can find your niche, and your differentiators, and then you really have to get disciplined around not just responding to everything that comes your way because that could be really tempting, when a business is starting up or is in growth mode, to just kind of go after anything. You can waste a lot of time and energy putting together bids and proposals for things that you maybe don't even want to win or the chances of winning them are so small that you could have been spending your time pursuing other opportunities.

So, I think, for any business, having a really clear picture of what your ideal customer, and ideal projects are, and how you differentiate, and then getting really disciplined about trying to stay in line with those and not just go after anything because you can waste a lot of time and energy pursuing things that aren't the best fit. But it can be tempting. I get it. It can be really tempting.

Josh:                I often have people tell me that, “Well, if I don't accept everything that comes across [inaudible 00:11:25], then, I won't have any work.” Then, my response to them is, “Well, that's actually why you don't have any work because people don't really know what you do.” And I agree with you 100% that becoming a niche-a-holic is really the easiest way to improve that sales to proposal ratio.

So, when you get pushback from a client, when you tell them that, and I'm going to bet that you almost 100% of the time get pushback the first time you bring it up, what do you say next?

Courtney:       So, we talk through creating a plan to achieve what you're trying to achieve and penciling it out. So, a lot of times, people are very good at creating strategic plans. They have a vision. They have strategies, but they don't pencil out what would actually happen if their plans work. And so, visualizing that for them, putting numbers to it, is really our next step is to show them.

Let's look at, if you-- so, let's just say that your volume of leads is okay and your win rate is too low but your average, you know, price per project is strong. What if we change the win rate? Look how many more dollars that translates to. So, what do we have to do to increase the win rate? Maybe it's better alignment of those projects or it could be any of those variables where often we're just tweaking and changing. And then, we can refine the strategy and make sure that the strategy that's in place actually pencils out to the results that we want.

So, that's our next step is helping them see how we can pencil that out, visualize the information, and show them, when we can move different levers and change different activities in the business, we can forecast what the different results will be. And then, we're constantly measuring what's actually happening and seeing if we need to pivot because, sometimes, when you start measuring and monitoring certain activities and you put a focus on one thing, something else that was going okay can change and fall off the rails. So, you have to always be mindful of what's happening. And when you start measuring one thing, that something else inadvertently start changing and now you have to adjust again.

Josh:                Yeah. We kind of look at that is if you're not getting enough at bats, you have to check your marketing, because you're not getting enough awareness out in the marketplace. And if you're not getting the percentage of closes you want, then you have to look at your sales process because usually you're doing something there's not right in your sales process to do that.

I'll give an example. I had a client in the Pacific Northwest at one point. And he was putting out, I don't know, three to five proposals a week. And in our dashboard, we found that he was only closing 10% of that which was ridiculously low. I've almost never seen something that bad. And when I asked him about that, I said, “Well, how often and how do you follow through?” And he looked at me and said, “What? Follow through? Huh?” I said, “You know, please don't tell me that you're never calling these people back after you send a proposal.” And that was the truth of what he did. So, I said to him. Very simply, I said, “Would you like to double your business tomorrow?” And he said, “Sure.” I said, “Start calling back the people you sent proposals to. If you can't get to 20%, you're dead.”

Courtney:       Yeah. That’s--

Josh:                I don't mean he was dead financially because he was doing fine financially but what amount of wasted effort.

Courtney:       Yeah, exactly. That's a great example of just, you know, a small change.

And so, these metrics, these non‑financial metrics that you can measure and put onto a dashboard could be from operational aspects of your business that could be around your people and your workforce. You know, it could be around sales and marketing. We work with clients to really understand where they’re having the biggest challenges or the biggest opportunities within those main areas of their business. And then, drilling down into those underlying activities, just like you mentioned, and kind of trying to diagnose, where's the problem? And then, what can we start measuring around that and experimenting with? Try some things for a while and track the data and see if it helps or if something else inadvertently changes.

That's a great example, Josh.

Josh:                So, are you aware of a technique called scrum, or agile technologies, or the Theory of Constraints?

Courtney:       Yes. So, we use agile marketing in our sales and marketing team here at TDT. So, we work in two‑week sprints, experimenting on, you know, for a short period of time. And then, assessing the results. And then, moving on, deciding, “Do we double down or do we scrap that?” Yes. So, I am familiar with that. At least, from the sales and marketing standpoint.

Josh:                So, in my opinion, you know, agile was first-- you know, it was developed by Sutherland for software development. And that's how everyone develops software today. Literally, everybody uses agile. But it actually, in his book, Scrum, he talks about building a house using Scrum. And I have been talking to my construction clients and my manufacturing clients who actually do things that would work in a two‑week sprint or a one‑week sprint that they need to do this or, if they don't, it’s just, you know, sort of a job chops. Then, he’d be using the theory constraints where they play whack‑a‑mole. Do you help your clients figure out how to do that stuff?

Courtney:       So, we haven't specifically worked with agile, except for internally. But we do work with clients around their processes and understanding that some automation and efficiency comes from software’s and integrated tools but some of it is just knowing who does what, when, in what rhythm, in what cadence, and having that clarity. So, we do work with process optimization, but we haven't helped anyone integrate agile or sprints into that, although we do use it internally.

Josh:                Yeah, I would-- you know, to me, that's a magic bullet with contractors. You know, for example, if you’re an electrician and you're building a house, you’re probably be in the house for three weeks, two weeks. And if you sprint on that, what if you can move that down to seven days? And if you're doing--

I mean, I hate people who charge by the hour. I'm assuming you guys charge by the hour because you're a CPA firm?

Courtney:       Some of our things are hourly and some of our work is value priced.

Josh:                Yeah. I don't understand why you guys don't do all‑value pricing. It is beyond me. I just don't get it.

I mean, I'll tell you every time I use value pricing with anybody, they go from their hourly rate, let's say it's $150 an hour, their utilization will go up to $200 to $250 an hour just because they find ways to do it faster and they get to keep the hours.

You know, I talk to CPAs a lot. This is my pet peeve about CPAs. I talk to CPAs and they say, “Well, you know, I might have to work two hours longer on one case.” I said, “Yeah. Well, what about the 97% of the cases you do less hours in?”

You know, I tell people, I say, “Okay, I'm happy to work by the hour for you. My rate’s $900 an hour or you can pay me $4,000. What would you rather do?”

Courtney:       Yeah. I know. It is interesting how that has hung on within this profession for so long.

Josh:                There’s a guy named Ron Baker out there who, if you happen to be in the professional services business, you need to read his books because he's very, very persuasive on dropping the hourly rates and going to, at least, project billing, if not, retainer billing. So, at any rate, I'll get off my soapbox about that for a second.

So, when you get a client, how much of the effort-- and this is interesting, because I think, you know, one of the biggest frustrations I hear from business owners about their CPAs is that they don't help me make my business better. They just tell me what happened yesterday. And they want you to help them make their business better.

It sounds like your company does that. And my bet is that your margins for your CPA firm are better than the average bear. Am I correct in that?

Courtney:       Yes. I mean, that is true because clients value guidance and advice more than they value compliance‑based services - things that they have to have done like tax returns and financial statements. So, they aren't price sensitive. They're value sensitive.

So, when you deliver something that they value more, you're able to have a better margin on that and it's more fulfilling for our team. Our people love helping clients solve these problems in their businesses and see them become more successful which, you know, is different definition of success for each business owner.

And that's part of what we do is understand “What is success to them? Is it working less? Is it making more money? Is it increasing the value of their business so they can sell it?” You know, whatever it is, but really understanding their goals. And then, helping them to achieve those by being more proactive and using the financial information to help them make decisions and be more strategic, pencil things out.

You know, there's lots of different ways that we do that. But I think it's a value difference, for sure, that leads to those better margins,

Josh:                Now, you just mentioned something that's really highly unusual for a CPA. We talk a lot about this. We call it the two sides of a business. You have the economic side which is the dollars and cents. And then, there's the personal side which is, how do you spend your time at work? And what are you doing when you're not at work? And are you living a fulfilled life?

I mean, that's the two sides of the business. And too many business owners focus on economics and completely forget the personal side. And I would submit that they are both equally as important. Without the economics, you don't have a business. And without the personal side, you get burned out. Does that make sense to you?

Courtney:       Yeah. Oh, I completely agree. And that's a big part of our culture at TDT because a lot of our profession-- and professional services, in general, but a lot of CPA firms, people burn out because there's such compressed work in a certain period of time, so a lot of, you know, pressure serving others. So, a lot of times people would burn out.

So, part of my role as the leader here is to really think about “How do we create a firm with a business model and a culture that I want to stay in long term without sacrificing my personal life and that I can attract and retain other team members to do the same?” So, it's very much a part of our own culture at TDT. And that shines through in the way that we work with our clients and helping them understand that there are things that can be done to reduce burnout. And what's, I think, really neat, is that a lot of those things that reduce burnout like putting processes and systems in place, and using dashboards and KPIs, they increase the value of your business as well.

So, whether you want to get out now or later, a lot of times people come to us burnt out, ready to just get, you know, be done. And we help them put things in place that would increase the value of their business and decrease their reliance on them. And it turns out, with less reliance on them, they could actually stay in the business longer and not burn out. So, I think it's really neat how those can work together.

Josh:                Yeah, we call that passive ownership.

Hey, Courtney, unfortunately, we are out of time. And I do have to tell our listeners that you've had a chance to listen to somebody who is running a truly unusual CPA firm.

If you think I was whining about CPAs today, you should see how I really whine about CPAs as a rule because they don't make their customers’ businesses better very often. There's one firm in Burlington, Vermont I know that does that really well. And it sounds like Courtney's firm, in Iowa, does that really well.

So, Courtney, I'm assuming somebody who might be listening might want to get in touch with you and see how you can help them. So, how would they go about doing that?

Courtney:       Yeah, absolutely. We would love to hear from you. We serve clients all across the country. Based out of Iowa, but we serve clients everywhere. You can go to tdtpc.com/cashflowcode and there you'll be able to sign up for a free discovery call with me or just check out our website and learn more about TDT and how we help small businesses.

Josh:                Yeah. And I have two things I want you to do. First is this important little thing which I keep asking and almost nobody ever does but please do it. Go to wherever you're listening to this podcast and give us an honest rating and review. It's really important. And, by the way, I mean, an honest rating review. If you love us, tell us you love us. If you hate us, which I hope you don't do, tell us you hate us. But please give us a review.

And the second thing is my second book is about to hit the world next month. It's actually available on Kindle today. You can buy it off our website probably next week, if we ever get our sales page up. And it’s called the Sale Ready Company. It's about a lot of the stuff we were talking about today is what do you have to do to get a business that's privately held to be sale ready, whether you transfer it internally, which is what we're trying to do to family, or selling to your managers or even doing a third‑party sale and all three should be looked at when you're going through this exit planning or transition process. Really easy to get the book. By the time this comes out, we will have our book site up. And you go to www.salereadycompany.com and you'll get a chance to buy our book for free plus shipping and I have a whole bunch of bonuses that are how‑to’s about how to use the stuff in the book.

All the folks who have read it so far have told me they really like it. I really loved writing it. It was just so much fun. And I hope you have fun reading it.

So, this is Josh Patrick. We're with Courtney DeRonde. You're at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.


Narrator:        You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”

If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at jpatrick@stage2solution.com.

Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.


Topics: business processes, dashboard, predictive dashboard, process improvement, business improvement system

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